Question: The Ramon Company manufactures a wide range of products at several plant locations. The Franklin plant, which manufactures electrical components, has been experiencing difficulties with fluctuating monthly overhead costs. The fluctuations have made it difficult to estimate the level of overhead for any one month. Management wants to be able to estimate overhead costs accurately in order to better plan its operational and financial needs. A trade association publication to which Ramon Company subscribes indicates that for companies manufacturing electrical components, overhead tends to vary with direct labor-hours. Data on direct labor-hours and the respective overhead costs incurred have been collected for the past two (2) years. Below is the collected raw data

1. Prepare a graph, including on it all data for the two-year period. Fit a regression line to the plotted points by visual inspection.
2. Using a linear regression method, determine the cost formula \((\mathbf{Y}=\mathbf{a}+\mathbf{b} \mathbf{X})\) for overhead in the Franklin plant.
3. What is the R2, for the overhead costs?
4. What is the reliability of this data?
5. Assume that the Franklin plant works 22,500 direct labor-hours during the month. Compute the expected overhead cost for the month.

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